Annex B
Letter to the Rt Hon Margaret Beckett
MP, Secretary of State, Department for Environment, Food and Rural
Affairs from the Chief Executive, National Beef Association, 14
January 2004
The National Beef Association is writing to
you in response to Lord Whitty's presentation to last week's Oxford
Farming Conference in which he indicated that Defra was seriously
examining alternatives to the historical allotment of entitlement
for Single Income Payment (SIP) which include a range of hybrid
systems in which entitlement would be allocated in England on
both an area and historic basis.
We are aware there is considerable debate on
this issue with, in broad terms, the livestock sector and farmers
in general favouring the historical route while landowning and
environmental interests regard hybrid allocation as most suitable
for English land management and agriculture.
Our own position in this discussion is relatively
straightforward because we believe immediate allocation of decoupled
entitlement to English farmers through anything other than a purely
historic qualification route will, for many reasons, undermine
Defra's ambitions for English agriculture and the management of
the English landscape and eventually be recognised by Defra as
a mistake it would, with hindsight, preferred not to have made.
Also, as we explained in a letter to Lord Whitty
on 9 January, although we understand his argument that at some
stage historical allocation will be outdated and the placement
of entitlement will have to be revised, we think that because
it could take as much as 10 years to evaluate the impact of management
changes within the beef cow herd on both farm structures and the
environment, it would be sensible if a review was not undertaken
until 2012 at the earliest.
One of our reasons for making these possibly
unwelcome statements is that the use of a hybrid system to fix
decoupled subsidy payments from January 2005 will provoke a feeling
of deep unease, even betrayal, among the vast majority of farmers—who
up until now have accepted Defra's challenging post-CAP reform
ambitions because they understood entitlement would be allocated
on the basis of historic coupled subsidy payments received over
the 2000-02 base years.
Our understanding is that although a number
of options have been examined at all levels within Defra its attention
has focused on an option which could result in the arable sector
immediately being subject to 100% area based entitlement allocation
and the livestock sector setting off with a 25% area allocation
that would increase to 100% over a yet undisclosed number of years.
In our view this (or any other hybrid) would
profoundly de-stablise beef, and other, sectors, for reasons outlined
in our response to your formal consultation on CAP reform in October—these
mainly being that because large numbers of forward thinking beef
farmers, who would be able to meet the decoupling challenge if
they were helped by the security of historic payments, will instead
say that the lower payment per hectare forced on them by even
a proportion of area based allocation will make it impossible
for them to start.
We would like to challenge the arguments put
forward by many environmentalists too. While we respect their
views we find that their primary contention that historic allocation
favours intensive farmers ignores its impact on marginal land
farms and all holdings which rent in land—including grass
lets.
They are also exercised by the need to sever
the link with historic production perhaps without realising, and
certainly without acknowledging, that the immediate adoption of
any area based payment will establish a permanent link between
past coupled subsidy payments and future land value which the
NBA feels England would do well to avoid.
We feel this is the core of the historic versus
hybrid argument because we believe that any area based allocation
will perpetuate the influence of traditional landowners on land
prices and rental charges and at the same time deny English agriculture
the only opportunity it has to reduce land costs—which we
think was a core feature of Dr Fischler's plans for the establishment
of environmentally sustainable EU agriculture, despite it being
faced with increased competition from lower cost imports, when
he first presented his plans for full decoupling.
Essentially any area based allocation will,
because it will cover every farmed hectare in England and not
leave empty squares (or naked hectares) on which entitlement belonging
to a tenant may be moved onto, present landowners with the opportunity
to force their own idea of rental values on tenants because tenants
will not be able to sell their entitlement or move it onto another
rented farm.
In this way even though entitlement is owned
by the farmer who owned the stock that qualified for coupled subsidy
payment in the 2000-02 base years it becomes, in the case of the
tenant, a tool which the landowner will use to establish higher
rental values based on entitlement income per hectare.
We would like to think that a Labour government
would recognise the opportunity to use the purely historic allocation
of entitlement to reduce land based capital inequalities and the
influence of those who have traditionally benefited from them.
It could also be argued that purely historic
allocation would be regarded as politically just by stock owners
who would otherwise argue that entitlement that was established
as a result of them keeping stock that qualified for coupled subsidy
would not have been available for redistribution if they had not
taken it upon themselves to (in the case of NBA members) persevere
with keeping cattle at a time when post-BSE influences, like the
absence of an export market, still weighed heavily on their business
incomes.
The absence of clarity over the consequences
of taking any area based option raises the possibility of other
potentially fundamental complications.
The NBA is aware of conflicting suppositions
within Defra and within the Dard in Northern Ireland over the
possible impact of hybrid allocation which will not be made clear
until the European Commission releases its implementation regulations.
One factor that is crucial will be whether hybrid
allocation will interfere with the ability of stock owners, who
have acquired entitlement through stock grazed on temporary grass
lets in the base years, to trigger it because all rented land,
including grass lets, in England will carry an area entitlement
of its own and there will be no naked land they can occupy to
release the entitlement payment specifically related to these
grass let hectares.
A solution to this would be Commission agreement
that they will be able to stack up the portion of historical entitlement
they earned from grass lets on land they occupy on a 365 day a
year basis.
This may arrive but then again it may not. So
in the meantime we would venture that it is safe to say that hybrid
allocation carries complexities, both seen and unseen, which would
not feature if purely historical allocation were used.
It is because of these, and other dangers, that
the NBA is strong in its believe that purely historical allocation,
subject to a 10 year review, would be the best option for English
agriculture and English rural management because its relative
simplicity carries less potential for unwelcome surprises.
Robert Forster
National Beef Association
January 2004
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